Sunday, 20 February 2011

I have a theory, well, actually that’s an exaggeration; I have a hunch.

My hunch is that the standard salary model employed by most companies in the capitalist west is fundamentally broken.

The model is, theoretically, based on the idea that the greater responsibility and accountability you shoulder, the greater your salary in reward.

In the realm of a small business, where the owner is the principle benefactor of success as well as being the main loser in the event of failure this is a clear and effective mechanism.

In a pure capitalist model this probably works as well, if your company underperforms your shareholders oust you from the CEO seat.

But we in the UK (and the US as far as I can tell) are a long way from a pure capitalist model. Government-granted monopolies permeate our economy in the form of copyrights, patents and trademarks, monopoly and merger commissions rule against market-created monopolies, deals are done behind closed doors in clubs and meeting rooms that do not act in the best interests of the shareholders or customers, etc etc etc.

We all know this, but we put up with it because changing it is outside our sphere of influence.

Lobbyists and voting blocs have more say that we do, we resign ourselves to the inevitable.

One of the reasons that it ends up being outside our influence is that there are actually a very small number of people at the top of the pyramid who not only wield a disproportionate influence in their domains, they also, through their connections to other members of this elite, have a disproportionate influence in other domains.

This effect is amplified by the “revolving door” by which people enter and leave government having made or influenced changes in the area that they subsequently work*.

This is where Stephenson’s Responsibility Threshold comes in.

Basically my hypothesis states that at the bottom of the salary scale the risks incurred by the individual are far greater than the potential impact of their failures, whereas at the other end of the scale, the impacts of the failures are far greater than the risk incurred.

I’ve represented this on the graph below:

I hope this makes sense?

The bit where the business and personal impacts meet is Stephenson’s Responsibility Threshold and it represents two things:

Firstly, it is the point at which you can say someone is over-paid (to the right) or that you have a job that is unlikely to reward risk takers and innovation (to the left).

Secondly, and this is where I’m really straying into the realms of the completely unsupported hunch, it highlights the point at which true accountability stops.

To the left you have a state whereby the individual does not fully have the authority for the job they have been charged to do (they cannot be accountable because they have never truly been empowered).

To the right you have the situation of the exec who signs-off the work without understanding what they have improved. Effectively they cannot be accountable because they cannot be expected to understand everything that happens beneath them (see Andy Coulson and James Murdoch [claiming] not to know about the phone tapping at News International papers for example).

Fortunately the more cerebral media (and Private Eye especially) provides plenty of examples that I can use to back up my theory:

A recent study highlighted by the BBC found that Directors were more optimistic than their front line staff about the future in terms of the wider economy, their company in particular and their personal future if something were to go wrong. Sherlock Holmes was not required to figure out why this might be the case; not only are the rewards higher, the penalties are lower too.

A junior member of staff at NBC recently posted (on you tube) a video clip from the early 90s of a couple of journalists discussing (and failing to understand) what the internet is. 20 years later it’s very amusing and lots of people looked it up. The people in the clip subsequently showed it on their current morning chat show and had a good laugh about it. The employee who posted it was fired.

The Rotten Boroughs column of Private Eye*** is riddled with examples of people failing hugely in one exec job only to turn up in a similar one 6 months later having received both a pay-off and a pay in. The In the City column shows much the same in the corporate world and the tragicomic career of Geoff Hoon is a classic example for how it works in government.

So assuming that you’re in complete concordance with what I’ve written, the only question remains is, at what level does the threshold manifest itself? Obviously this will vary from company to company but I’m reckoning it’s in the region of £142,000 - $400,000.

*Google Richard Bowker for a prime example.

** Some nice examples of reward for failure here:

David Liddiment, oversaw the collapse of ITVs ratings to its lowest level in 47 years, now a BBC trustee advising on Radio 4.

Sally Morgan, former Blair aide exposed in the cash-for-influence sting by Channel 4, now chair of Ofsted.

Lord Lang, former tory MP, got lucky under Major, rejected by his constituents in '97, now chairman of the Advisory Committee on Business Appointments.

Thursday, 17 February 2011

I read a blog from Scott Adams (he of Dilbert fame) recently about how, if you were to start a democracy from scratch today, you probably wouldn't do it by party lines. In an internet connected world (and I fully accept that this doesn't apply in quite large areas of the planet) there are much more effective and accountable ways of doing things.
The government has backed off on the forestry sales plans, which is a good thing, but, and I shall quote directly from Geoffrey Lean in the Telegraph:
"It’s not just that over half a million people signed a petition against it; over 100,000 actually went to the trouble of contacting their MPs, and more than 30 local groups mushroomed around the country to protect their forests. It’s been a sharp reminder of something governments too often forget, that there is world beyond Whitehall."There is indeed a world beyond Whitehall, and it's accelerating away from the petty tribalism that hinders our making real progress as a country.We are communicating directly now, to each other, to corporations, to NGOs and increasingly to our government, but how often do they listen? This is a rare occasion, have no doubt.

There are two things to take from it though, which should give us some hope.Firstly, the parties are becoming increasingly irrelevant. The tools for a direct democracy are all around us and we are using them in ever increasing amounts.Secondly, the lobbyists are becoming irrelevant. Organisations are waking up to the fact that their customers are now connected and can, when the need arises, cut out the middleman and speak with one voice.Lots of companies are picking up on this, they have to because they're bottom line can't handle the impact if they don't.The governments will have to, or they will fail and fall.

In the meantime of course you can expect all kinds of panicky legislation and massive lobbying, but it's a step forward.

To bring this blog full circle I'll hand you over to Sue Holden of the woodland trust:

As I write, there is a proposal to water down protection for ancient woodland in the planning system. We need your help to defeat this proposal by 28th February.

We must not let public passion and support for our woods and forests die down and now that ownership is no longer an issue, we must not lose sight of the need to increase protection for ancient forests and restore those planted with conifers, a once in a lifetime opportunity for woodland conservation.

Our campaign will continue and we urge everyone to continue to sign our petition and transfer their passion about who owns England's public woods to ensuring that all of England?s woods survive in the future.

Sunday, 13 February 2011

I'm a big fan of the video Shift Happens. If you haven't seen it already, take a moment to absorb some staggering statistics.

Enjoy that? I love it.
Today I found another couple of interesting statistics courtesy of this article on the BBC website.
The whole "295 exabytes of information" is, to be frank, almost meaningless. The number is too large to comprehend for mere mortals.
But further down the article there's a much more interesting (well, interesting to me) statistic: "It shows that in 2000 75% of stored information was in an analogue format such as video cassettes, but that by 2007, 94% of it was digital."
Whoah!
In seven years we went from massive majority analogue information to even-more-massive majority digital information. It's no wonder that so many industries are struggling to understand the real impact that has on their businesses.
The internet is a digitial copy machine (hat tip: Confused of Calcutta), and a very price-efficient one at that. Trying to shift your business model from one where you were the gate-keeper of a finite resource to one where you become the introducer to an infinite one is a mighty task, and it's no wonder so many industries are resorting to ever-increasing attempts at protectionism (read the blogs from any day's output on techdirt) rather than waking up to the fact that the world has changed and their business model is no longer fit for purpose.